The cost of employer-sponsored health plans jumped 7.3% in 1999, and employers are budgeting for a 7.5% increase this year, according to a new survey.
The average cost per employee rose to $4,097 in 1999 from $3,817 in '98, according the annual survey of 3,160 employers released last month by William M. Mercer, a New York City-based benefits consulting company. The increase was nearly three times inflation.
Between 1997 and 1998, the cost of health coverage for employers rose 6.2%.
"The cost increases are now clearly a trend," says Bob Braddick, a Mercer consultant in New York.
The report showed HMOs didn't keep costs down much better than traditional indemnity plans. HMOs cost employers 5.4% more in 1999 than 1998. Traditional indemnity products jumped 6.5% during the same time span.
Enrollment in closed HMOs has remained at 30% for two years. But enrollment in preferred provider organizations rose to 43% from 35% during the same time period. Employers are looking for less restrictive yet affordable products to meet employee demands for more choice.
Employers say they're unlikely to ask employees to bear a higher portion of healthcare costs for fear of losing workers in a tight labor market, Braddick says.
Increasingly, employers are targeting prescription drugs and disease management to control costs. Among employers with 500 or more employees, 32% made changes to drug benefits last year. In 1999, the number of PPOs offering one or more disease management programs jumped to 58% from 47%.
Employers also are concerned about the threat of lawsuits by enrollees. In the last quarter of 1999, a flurry of class action lawsuits were filed against health insurers accusing the plans of activities from lying to patients to extorting physicians (see November, page 3).